Madagascar Scoping Report
30 September - 2 October 2014
A Report by British Expertise
I
Project Introduction
The intention of this report is not to provide a detailed economic analysis or historical overview of
the Malagasy market, but rather to share the experience gained during the delegation’s visit. The
following document will provide an outline of the commercial context, meeting reports, and key
contacts. Given British Expertise’s priority sectors, this project focuses in particular on the role UK
skills can play in the development of the social and physical infrastructure sectors.
British Expertise would like to extend particular thanks to:
Soarinantenaina Ratsimbazafy, Prosperity Officer, British Embassy Antananarivo
Timothy Smart, HM Ambassador to Madagascar
Grant Mandigora, Regional Co-ordinator, UKTI South Africa
Further thanks should be given to Josh Lambeth and D. Rachel Gee of British Expertise for their
preliminary project research and editing.
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II
Market Overview
Madagascar sits firmly as a low income country with a GDP per capita of around US $471 (World
Bank). Of a population of nearly 23 million people, only around half a million participate in the formal
economy. Between 2009 and 2013, Madagascar faced an extremely difficult period of political and
economic instability. In March 2009, following civil unrest, President Marc Ravalomanana was ousted
in a coup and fled Madagascar. The country was subsequently governed by the High Transitional
Authority of President Andry Rajoelina. Following the removal of Ravalomanana, many international
organisations, such as the South African Development Community (SADC) and the Organisation
Internationale de la Francophonie (OIF), suspended their relationship with Madagascar, as did many
multilateral funding and development bodies. The African Union (AU) imposed sanctions on the
country. The impact of this crisis is ‘still hampering economic and social progress’ (African Economic
Outlook, 2014, p2). In 2014, Madagascar ranked 148/189 in the World Bank’s Ease of Doing Business
rankings.
After long running negotiations between political parties and a number of delays, legislative and
presidential elections were finally completed in December 2013. The elections were widely perceived
to have been predominantly free and fair. The former Minister of Finance in the Transitional Authority,
Hery Rajaonarimampianina, was elected President. With the support of the party of exiled former
President Ravalomanana, Rajaonarimampianina was able to secure a parliamentary majority.
However, 'significant risks remain' (EIU, September 2014, p10); the backers of Ravalomanana could
remove their support for Rajaonarimampianina’s Government if his unexpected return to Madagascar
is not handled appropriately.
The December 2013 elections 'should support a more stable political environment' (EIU, September
2014, p10). The President and Prime Minister Roger Kolo are likely to continue to 'promote an agenda
of consensus, reconciliation and the restoration of basic values of governance' (EIU, September 2014,
p10). The European Union (EU) and International Monetary Fund (IMF) have resumed their financial
support for Madagascar, and the relationships with the AU, SADC and the OIF have been normalised.
Following the 2009 coup, the United States suspended the trade preferences provided to Madagascar
through the African Growth and Opportunity Act (AGOA); these are expected to be restored in early
2015. The British Department for International Development (DIFD) do not maintain a presence in
country, although they do contribute widely through third parties such as the Darwin Initiative, WSUP
(Water and Sanitation for the Urban Poor), ODI Fellows, ESPA (Environmental Services for Poverty
Alleviation) and most significantly through various international organisations (including the EU,
World Bank, the African Development Bank (AfDB), World Food Programme, IMF, United Nations
Development Programme (UNDP), and UNICEF).
Despite these positive developments, the period of crisis from 2009-2013, 'constrained growth and
fiscal revenue, leading to a sharp compression of public investment and social outlays, with serious
social consequences' (IMF, June 2014, p1). The vast majority of Malagasy people (around 90%) are
thought to be living on under US $2 a day.
With large mining projects starting commercial production, improvements in rice production, and a
more positive political environment, the IMF is projecting a growth rate of 3% for 2014, which, by 2015,
the AfDB expects will have risen to 5.4%. Although, this growth is dependent upon the Malagasy
Government’s ability to rebuild their support for the county’s social and physical infrastructure, whilst
addressing the country’s large balance of payments needs and maintaining nascent political stability.
The Government 'will have to collaborate closely with the IMF and donors' (EIU, September 2014, p11)
to ensure they can properly address the substantial challenges facing the country.
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In June 2014, the IMF approved a disbursement of US $47.1 million and, in August 2014, the Arab
Bank for Economic Development in Africa also approved a loan of US $11 million to rehabilitate the
road between Faratsiho and Sambina. The World Bank is reportedly planning an US $80 million loan
to JIRAMA, the ailing state utility company, to provide new infrastructure and give the necessary
technical assistance to improve management structures. The AfDB did not halt their support for
Madagascar during 2009-2013, but it is clear that the government will have to continue to follow
through their commitments to reform in order to encourage more donor and multilateral engagement
with the country.
If Madagascar is truly to be able to engage with the international business community and participate
in global value chains, ‘it must end recurrent political unrest, fight corruption strongly, train the work
force and improve infrastructure’ (African Economic Outlook, 2014, p2).
Despite challenges, Madagascar remains 'a country with many advantages: unparalleled biodiversity,
a great potential for agriculture, mineral resources and abundant labour. With complimentary physical
and human capital and effective governance, it would be a prosperous country' (World Bank, 2014, p4).
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Trade with the United Kingdom
From January to July 2014, the UK-Madagascar bilateral trade in goods increased by 8% compared
to the same period in 2013. Bilateral trade between the UK and Madagascar was valued at
approximately £18.4 million. Over this period, Madagascar reflected the UK’s 168th largest export
market. In 2012, the UK exported approximately £14 million in services to Madagascar (Sources:
Office of National Statistics and The Pink Book).
Priority Sectors
Transport
With a limited budget, Madagascar’s transport infrastructure development is highly constrained. As a
result, there is great need for international support and expertise. Many of the roads remain unpaved
in the country’s vast network. The eastern part of Madagascar’s rail network is subject to recurrent
financial issues and requires significant investment in rolling stock and infrastructure. Ivato Airport
'generally meets safety and security standards' (World Bank, 2014, p191), but the rest of the aviation
network needs substantial improvements.
Key Development Projects: The Road Infrastructure Development Project (PAIR), managed by the
AfDB; Antananarivo to Toamasina/Tamatavo Motorway; Toamsina and Ivato airports.
Water
Madagascar has improved access to potable water since 2011 by 48.1%; however, the country still
suffers from distribution and sanitation problems due to budget limitations (Source: UNICEF,
Madagascar). Over 18 million people do not have access to proper sanitation in Madagascar. As of
2012, Madagascar had an infant mortality rate of 4.1% (Source: UNICEF, Madagascar). The Ministry
has formulated a 2025 strategy document, but will struggle to implement it without support.
Key Development Projects: African Development Fund’s Rural Drinking Water Supply and Sanitation
Programme.
Power
Despite the major energy and power challenges, Madagascar is rich in latent hydroelectric power
with nearly two-thirds of its electricity harnessed through such means. However, its development is
hindered by the inefficiencies of the parastatal JIRAMA. Only 15% of the total population have access
to electricity. Currently, Madagascar has an installed generation capacity of around 450 MW, with the
potential to generate approximately 7,800MW. The Ministry of Energy plans to release a new electricity
policy towards the end of 2014, supported by the EU.
Key Development Projects: SE4ALL (Sustainable Energy for All), the EU project for the development of
reliable energy services in Madagascar.
Extractive Industry
Madagascar’s wealth of natural resources could contribute substantially to global markets. The
country is host to a variety of precious metals, minerals, hydrocarbons and gems. In 2007, the
Ambatovy mine was established with its refinery in Toamasina; it is now one of the largest mines in
the world. The extractive community is still relatively small and is hampered by poor infrastructure.
Key Development Projects: Ambatovy mine, QMM/Rio Tinto mine, Societe Kraomita Malagasy.
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Views of the Delegation
The delegation’s visit took place during an important period of policy development for the Malagasy
Government, with a new (and delayed) National Development Plan (NDP) being formulated and new
Public-Private Partnership (PPP) and Petroleum laws being drafted.
The new NDP will be vital for the normalisation of Madagascar’s relationship with the donor
community and the coherent implementation of major infrastructure developments. On 22 October
2014, the Ministry of Economy and Planning provided an update on the process to private sector
organisations in Madagascar. The plan will 'promote sustainable and equitable development', with
growth driven by mining projects, tourism, social and physical infrastructure development, agriculture
and development of export processing zones. The NDP will also support the reorganisation of stateowned enterprises and strengthen market-driven economic management.
The final NDP is expected to be released in 2015.
The Economic Development Board of Madagascar (EBDM) is also working on a draft updating PPP
law. Given the extremely limited resources of the Malagasy Government, the private sector will be
'the main engine of growth' and should have an 'increasingly important role for carrying out studies
and financing infrastructure investments' (World Bank, 2014, p196). The development, management,
and execution of PPP projects are well known areas of UK expertise. British companies could provide
substantial support to Madagascar in its pursuit of PPP finance solutions. During the delegation’s
meetings, we regularly encountered mixed understandings of PPP in Malagasy Government and
parastatal organisations. In many instances, the concept was conflated with what might ordinarily
be understood as Corporate Social Responsibility (CSR) projects, rather than concessionary PPP.
International support will likely be necessary, if the PPP concept is able to be engrained across
departments that are expected to be delivering PPP infrastructure projects.
The upcoming Petroleum law was also the subject of much discussion during the visit, as the draft
proposed law seeks to cover both the upstream and downstream sectors, which could force smaller
exploration companies to become engaged with production. It will also drastically change the role of
the Office des Mines Nationales et des Industries Stratégiques (OMNIS).
The power sector was consistently highlighted as a particular area of weakness for the country
throughout our visit. The sector simply 'has not fulfilled its function as the locomotive for economic
activities' (World Bank, 2014, p9). The parastatal, JIRAMA’s, finances have declined rapidly over the
last three years due to 'declining operational efficiency… inability to collect fees to cover costs, and
the rising price of inputs' (World Bank, 2014, p9). Consequently, it has required further subsidies
from the Malagasy Government to pay for fuel, generators and purchases from Independent Power
Producers (IPP). Reform of JIRAMA is a priority.
Transparency International’s Corruption Perception Index ranks Madagascar 127/177. Throughout
our programme, it was clear that corruption is present across all levels of the economy. The Bureau
Indépendant Anti-Corruption (BIANCO) has recently recruited a new head, but the organisation is
substantially under-resourced.
Madagascar is ripe with potential for increased international engagement beyond its traditional
partners. The delegation’s Anglophone composition was rarely commented on; although, it is clear
that any company operating in the market will need Francophone staff. A coherent and businessfriendly NDP, PPP, and Petroleum laws will do much to increase confidence in the market from both
donors and the private sector. If Madagascar continues on a path of political stability and reform, it
is likely 2015 will be a key year for putting the legislative and policy building-blocks in place for the
successful development of the nation’s social and physical infrastructure.
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III
Meeting and Visit Reports
Timothy Smart, HM Ambassador to Madagascar
The delegation arrived at an exciting time for British-Malagasy relations. After closing in 2005, the
British Embassy reopened in 2012 and is now fully operational, focussing major attention on
supporting British businesses considering opportunities in Madagascar. This meeting was a key
chance for the delegation to understand more about the UK’s reinvigorated relationship with
Madagascar and hear about the Post’s diplomatic priorities.
The Ambassador encouraged British companies considering engagement with Madagascar to be as
'risk aware as possible'. The lack of governance, endemic corruption, and substantial poverty within
the country are genuine and complex challenges. But since the election of the new President, there
has been 'real political will to change'.
The Ambassador described the three key 'pillars', which he hopes will remain at the heart of the
government of the new presidency as:
• Rule of Law
• Good Governance
• Stability and Security
President Rajaonarimampianina seemingly has the vision and commitment to change the country for
the better and to address these deep-seated issues. 'He understands what he needs to be doing', but
the challenge will be to bring the civil service and the political class on board to support this change.
Four Fellows from the Overseas Development Institute (ODI) are stationed with the Ministry of Finance
to help support the process.
At the time of the visit, the Ambassador felt that the diplomatic community was likely to be 'more
positive' than the international business community. After a difficult five years, growth in the business
community’s confidence will require the Malagasy Government to start making substantive progress.
Although, he noted that British business people, particularly in the natural resources sectors, were
showing signs of 'cautious optimism', though an environment of 'delays and necessary persistence'
remains a fact of working in the country.
With regard to the matter of the return of former President Ravalomanana, the British Government’s
position is that this would be 'a key part of a healthy healing process'. It could support political
reconciliation and, in turn, the political and economic development of the country.
The Ambassador hoped that as the international community and donors began to reengage with
Madagascar, this might encourage further international investment and create 'a virtuous cycle'. If
the Malagasy Government begins to realise the concrete social and economic benefits of change, the
more engaged the international and business community will become, and the faster socio-political
change will happen. The challenge remains for the international community 'to get Madagascar over
the first hump'.
A NDP has been delayed and is a necessary step for the country to start receiving further international
development support (in particular from the EU). The Chinese are clearly building their interest in
Madagascar, particularly in the west of the country. Many expatriates have made the anecdotal
observation that it is now very difficult to purchase crabmeat in the country, as it has all been
exported to China. The Ambassador stated that a few weeks prior to the delegation’s visit, much of the
Malagasy Cabinet had been on a large scale visit to China, where they were met at a very senior level.
Chinese interests are 'a reality on the ground', which presents some opportunities for UK specialists
to provide niche high standard support to Chinese companies.
7
From the Ambassador’s perspective, the UK offer to Madagascar 'is naturally a commercial offer, UK
companies have the skills to really help Madagascar’s development'. For example, Toamasina port,
thanks to support from the Japan International Cooperation Agency (JICA), is of a good standard,
but the infrastructure around the port is severely lacking and does not allow the country to take full
advantage of the facility. There are 'clear opportunities' in infrastructure development; furthermore,
companies in the extractive industries are going to be 'actively looking for infrastructure partners' as
they move beyond the exploratory phase of their work. Companies should remain realistic about the
existing funding challenges the country faces, but the need for the high standard skills that UK
companies offer could not be greater.
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Networking Dinner: UK Business People in Madagascar
The delegation met a group of UK business people in Madagascar with experience in sectors as
diverse as legal services, natural resources and textiles. It was an open discussion of the particular
challenges of operating in the Madagascar market. The fact that the present companies had all
continued to maintain a presence in the market demonstrated their obvious commitment to the
country and their belief in the growth of commercial opportunities.
UK organisations operating in Madagascar, particuarly during the crisis years of 2009-2013, faced
many challenges but the group was enthusiastic about opportunities in the market as it emerged from
a difficult period. ‘There is huge opportunity’ in Madagascar, but the ‘political situation is not easy’.
Given the traditional French influence in the country, UK companies have a small presence. The group
maintained that a key advantage of UK organisations is that they represent a real (but complimentary)
alternative to French companies, thus demonstrating a different way of working. At present, the
country is ‘always looking for alternatives’ to its traditional international relations. The UK ‘represents
a new language and a new way of doing things’ that could help them engage more effectively with
their regional partners.
Much of the discussion focussed on Madagascar's burgeoning extractive and oil & gas industries.
Ambatovy's US $6.3 billion nickel and cobalt mine, 80km from the capital, represents the largest
investment in Madagascar's history. Once fully operational, it should be one of the largest lateritic
nickel mines in the world, producing 60,000 tonnes of nickel and 5,600 tonnes of cobalt every year for
30 years. Madagascar Oil, a publically listed company on the London Stock Exchange, is an onshore
oil company, responsible for the heavy oil fields in Tsimiroro (operated by Madagascar Oil, estimated
reserve of 3.9 billion barrels) and Bemolonga (operated by partner company Total, estimated
recoverable reserves of 2.5 billion barrels). At Tsimiroro, the company has been running a
steam-flooding pilot project. Vivo Energy, the country's Shell Licensee, has been importing and
distributing shell fuels and products in Madagascar for 14 years.
The major power and infrastructure challenges faced by Madagascar are an ongoing problem for
companies operating in the market. The state power and water utility, JIRAMA, was identified as
an especially problematic public body, whose capabilities have been severely damaged by
mismanagement, aging infrastructure, and lacking funds. Reportedly a third of all fuel in the country
is used to power JIRAMA's inefficient generation capacity, while the country itself is rich in latent
hydroelectric power. In the future, the power sector could represent a real opportunity for UK skills
and expertise, not just from the engineering perspective but also to help Madagascar explore a variety
of project financing options, such as PPP.
As the mining, oil, and gas industries expand, it is fundamental that the companies and the Malagasy
Government are able to co-operate, thus ensuring that the appropriate infrastructure is in place to
support the growth of the industries. Contract processes and payments in the country were deemed to
be very challenging by the group, but ‘there is always a solution in Madagascar’; you may be unlikely
to be paid on time, but ‘you will get paid’.
All present underscored the complexity of the political sphere in Madagascar. Those who had been
in the country for many years and had seen a number of dramatic political transitions were more
cautious about the current leadership's ability to instigate real stability and change. The challenges
of changing the culture of a powerful civil service and managing the diverse interests of the large
country's many regions were noted as being particularly difficult.
Malagasy communication and business cultures are ‘vastly different’ to nearby countries in the region.
Companies have to be very aware that most day-to-day business in Madagascar is conducted in a very
different way to the near African continent.
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Corruption in the country is ‘clearly endemic’, but the Ambassador felt that ‘the Ministry of Justice
has a clear ten year plan to deal with this’, although this will require a transformation across Malagasy society. The long standing poverty of the country has led to major governance issues
throughout the economy. The group felt that the Justice system presented some of the most complex
corruption challenges. BIANCO has recently come under new leadership, but has limited resources
and capability.
Despite the above difficulties encountered by the companies, their enthusiasm for the market was
apparent. The meeting closed with an encouragement to the delegation to ensure that they visit the
country as regularly as possible and develop a network of local contacts and partners. If the current
commitment to change by the Malagasy Government is followed through, ‘first mover advantage will
be key’, especially as the country consciously seeks to build new relationships with new partners
outside of the Francophone world.
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Aviation Civile de Madagascar (ACM, Civil Aviation Authority of Madagascar), James
Andrianalisoa, Director General
The Director General highlighted three interlinked, key areas for development for the aviation sector
in Madagascar: 1) Safety and Security Standards; 2) Training needs; and 3) Increasing Capacity and
Capability.
Foremost in the Director General’s mind was the need for the Malagasy aviation sector to bring itself
in line with international norms and standards to ensure an acceptable level of safety in operations.
This is vitally necessary, not just to support the industry, but also the country’s important tourism
sector. Air Madagascar is currently on the EU’s B-list for airline operators, although the Director
General 'expects [it] to become fully compliant over the coming months'. It 'will be ready for the
European Commission’s audit early next year'. Over recent years, the ACM has been conducting a
series of certification activities, and the Director General clearly was aware that investment in
manpower and expertise will be necessary to maintain the ACM at an internationally compliant level.
The root cause of the country’s challenges in the aviation sector, according to the Director General,
was simply the 'failure to supervise the industry'. There is a considerable lack of specialised local
personal in the sector. The ACM is extremely keen to engage with international companies,
particularly those from the EU, who could support Madagascar in its training needs to help ensure
that the sector has a proper, sustainable, supervisory structure.
The ACM’s capacity and capability of the aviation industry presents significant human resources
challenges if Malagasy staff hope to be able to support a more sophisticated industry and better,
newer aircrafts for the state airline. Presently, the ACM is working with SADC partners on a pooling
of regional resources and the development of coordinated procedures and documentation. The ACM
also recently signed an agreement with their French counterpart, the DGAC (Direction Générale de
l’Aviation Civile), to provide support in the development of their capability and capacity.
The delegation noted the substantial experience within UK organisations, such as their own, to
support the development of airports and the aviation sector. From master-planning and engineering,
to policy development and training requirements, UK companies could provide significant support to
the ACM. The group proposed the possibility of embedding UK specialists in the ACM. The Director
General was responsive, recognising that the Ministry of Transport could accept unsolicited proposals
for assistance. He mentioned, however, that the ACM’s engagement with international specialists is
'certainly restricted by budget'. The Director General’s budget for international consultancy and
support was indeed limited at approximately €1.4 million until the end of 2016.
There remains a funding gap of €700,000 needed to help the ACM fully meet International Civil
Aviation Organisation (ICAO) requirements. The Director General 'needs more international inspectors
and consultants' than his funds currently allow. One particular priority for him is to secure assistance
from consultants specialising in airworthiness and operations management.
The Director General expressed some reservations with regard to the European limitations on working
hours for pilots, which might prevent him from increasing the sector’s productivity to desirable levels.
The Director General argued Madagascar 'is a very specific operating environment' and such rules
may not be suited to the country.
Beyond the ACM’s immediate needs to address the EU’s concerns, the organisation is keen to engage
with the regional partners in Africa, but is finding the predominantly English language environment
challenging. In coming months, a major airport development plan will be released alongside the
upcoming NDP. The Director General advised the delegation to get in touch with him, or the Ministry
of Transport, to discuss the outcomes of these plans and where UK skills might be able to assist once
the plans are released.
Aviation Civile de Madagascar
13 Rue Fernand Kasanga
101 Antananarivo
Madagascar
11
Ministere D’Etat en charge des Infrastructures, de l’Equipement et de l’Amenagement du
Territoire (Ministry of Infrastructure, Equipment and Regional Planning)
Luc Marcel Rakotonirina, Director of Cabinet
Rafaralahy Andrianoary Rakotoarisoa, Director General of Large Works
The Ministry, only recently set up in its current format, 'embodies the President’s vision of
development'. It is responsible for the planning, design, and construction of major infrastructure
projects. The Ministry works closely with the Ministries of Transport, Public Works, and Agriculture.
It is split into three Directorates:
Large Public Works
This Directorate oversees major projects across the country. Such projects include the renovation and
development of highways (such as the Antananarivo to Toamasina/Tamatave motorway), Toamasina
and Ivato Airports, port expansions, the extension of Antananarivo, new cities and the renovation of
300km of canals on the east coast.
Land Ownership
This Directorate is responsible for ensuring that land owned by the state is properly managed,
regulated and made open for investment wherever possible. This directorate’s work is 'the common
basis' for the entire Ministry’s work, since the organisation seeks to make it as easy as possible for
major infrastructure developments to take place. In accordance with the expected NDP priorities, the
EU and the French Government are supporting a project to ensure the security of land ownership
across 125 key target communes.
Land Development
This directorate is responsible for co-ordinating development, according to national, regional, and
commune level development plans. It ensures that any new infrastructure projects or communities
are properly managed, have appropriate access to utilities, and are developed in a planned manner.
The Malagasy Government, at present, are planning to pass a Land Development Law, which is hoped
to allow major public works and vital infrastructure projects to be executed as smoothly as possible.
Land ownership remains a complex issue for Madagascar. The Ministry has had to postpone the
development of a road bypass project because it became too challenging to ascertain who owned the
land. However, funding and budgetary constraints also severely limit what the Ministry is able to
practically undertake. As a consequence of the five years of crisis, the Ministry 'has no fixed budget'
and is promoting investment from companies that could provide infrastructure 'on a concessionary
basis'. It will be working with international donors to develop projects on a non-concessionary basis.
The Directors emphasised their need for assistance from international advisers and trainers, who
could help support infrastructure development, whilst also transferring skills to the local population.
Their planned programme of works over coming years will be huge and will not be possible using
Malagasy skills alone. They felt the most likely route for reliable short-term international support
would be through donor led projects, which could specify a certain amount of international
engagement.
However, upcoming donor and multilateral engagement with Malagasy infrastructure projects are
limited since the NDP had not been completed, at the time of writing, and is a key factor for many
organisations’ full reengagement with Madagascar.
The Ministry representatives remarked that they would like to contact the British Embassy directly to
discuss their needs, and stated that they would advise the Embassy, as soon as completed, of a list
of key projects available for international engagement. The country 'needs technical cooperation' to
realise its future goals.
Ministere D’Etat en charge des Infrastructures, de l’Equipement et de l’Amenagement du Territoire
Bâtiment des Travaux Publics
Anosy - Antananarivo
Madagascar
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Ministère des Travaux Publics (Ministry of Public Works, and affiliated agencies)
T. Ndriana Guy Razanamasy, Advisor to the Minister
Marie-Annick Dahy, Technical Advisor to the Minister
David Barthe Ranoelinjanahary, Director General of Public Works
Benitany Randimby, Secretary General, Roads Maintenance Fund
Louis de Gonzague Randrianarisata, Director General, National Laboratory for Public Works
Pascal Ramananamisata, Director General, Roads Authority of Madagascar
Désirée Andriamalala, Director General, Institute for National Infrastructures
This meeting, with senior representatives from the Ministry and associate parastatal agencies,
focussed on the country’s needs in roads and highways. The Ministry is in charge of the 12,000km
Route Nationale (RN) network, only 10% of which is in good condition. The country has a road network
of 30,000km (a drop from a network of around 60,000km in the 1960s). Communal roads are not under
the Ministry’s auspices and are managed at a local level.
The Ministry and its partner organisations have three current priorities:
• Improving RN network
• Improving accessibility to rice producing areas
• Renovating priority roads for the tourism sector
The improvement of roads in Madagascar is subject to substantial financial challenges. The Roads
Maintenance Fund, provided for via fines and fuel taxes (at around 5% currently), has a budget of
approximately €30 million per annum. However, the Ministry estimates that nearly €2 billion of works
are necessary to bring the road network up to the desired standard.
The Ministry is well aware of the huge challenges it faces and noted that it was 'researching
alternative opportunities' into how to approach its work. Particular sources of difficulty have been
the use of clay roads, which degrade very quickly, and the diverse nature of the Malagasy geography.
The Malagasy Government are now seeking to intervene with problem roads before damages occur
and ingrain a regulated programme of maintenance. From the project finance perspective, the
Ministry is enthusiastic to investigate opportunities presented by CSR programmes of companies in
the extractive sector and the possibility of PPP to improve and develop the road network. The Ministry
is 'very open to experience and expertise from overseas' to help them, as long as its needs to localise
skills are met.
At the time of writing, a PPP law was being drafted. The delegation emphasised the strength and
depth of UK PPP and project finance experience. The Malagasy side of the meeting felt that the
country was 'a complete newcomer' to PPP. It was clear to the delegation that the concept of PPP
had, in part, been conflated with CSR road construction projects. The Ministry suggested 'two forms
of PPP roads': one with major extractive companies providing roads to improve access between mines
and export routes, and the second being roads developed as part of CSR programmes for the local
community. The Ministry was very welcoming towards the possibility of UK support to help them better
understand PPP project financing models.
The meeting closed encouragingly as the delegation received an invitation to a roads conference. And
the clear declaration from Mr Razanamasy demonstrated the Ministry’s desire to 'widen its spectrum
of partners' and use international skills to help improve their decision making process and execution
of projects.
Ministère des Travaux Publics
Bâtiment des Travaux Publics
Anosy - Antananarivo
Madagascar
13
Economic Development Board of Madagascar (EBDM), Eric Andriamihaja, Deputy Chief
Executive Officer
The EBDM is the official investment promotion agency of Madagascar. It formally sits under the
auspices of the Ministère de l’Industrie, du Développement du Secteur Privé et des Petites et
Moyennes Entreprises (The Ministry of Industry, Private Sector Development and Small and Mediumsized enterprises), although it co-ordinates with many other ministries and government agencies.
The EBDM have three primary areas of activity:
• Improvement of the business climate in Madagascar through researching challenges
faced by businesses and proposing reforms
• Investment promotion activities
• Investment facilitation and provision of 'one stop shop' for visas, permits, freezone
agreements, etc.
EBDM is the government agency 'in charge of public-private dialogue'. It is leading the development
of the country’s up-coming PPP law, which is hoped to be ready for the May parliamentary session.
Mr Andriamihaja was frank in his assessment that 'simply put, every sector is a priority in
Madagascar'; however, six sectors have been identified as priority areas for development by the EBDM.
Tourism
Agriculture
Madagascar is renowned worldwide for its unique touristic offer; 90% of plant species and 70% of
animal species are endemic to the country. Growth of the sector is heavily restricted by the lack of
good infrastructure. Many major tourist locations are only accessible by dirt roads, and airports
require substantial upgrades. Over the past year, the number of tourists visiting Madagascar
increased 18-20%; it is expected that 20,000 hotel rooms will need to be built to keep up with demand.
Madagascar possesses approximately 80 million hectares of arable land; however, agriculture in
the country is still very traditional and lacking in modern equipment and techniques. Processing
in-country is very limited, and production needs to be brought up to international export standards.
Light Manufacturing
There is very little production of food and beverage products in Madagascar. In the past, the country
used to be the second-largest garment producer in the world, but political and economic struggles
have severely damaged the sector. With Madagascar’s coming reintegration into the AGOA scheme,
Mr Andriamihaja was hopeful that garment manufacturing would increase. The UK’s Marks &
Spencer are already sourcing from the country, as are GAP, Inc. and Royal Dutch clothing.
Information & Communications Technologies (ICT)
For the past four years, Madagascar has been building its ICT capabilities as it became connected to
the international fibre-optic network. At present, the country hosts 20-25 call centres focussing on
serving the Francophone world. The country is also seeking to expand website moderation and online
accountancy services.
Infrastructure
Covered further in this document, Madagascar has huge infrastructure development needs if it is to
reach its full economic potential. There are needs across all elements of infrastructure, particularly
in transport, with roads serving as a priority for the Malagasy Government.
14
Extractive Industries
A key priority for the EBDM is supporting the exploitation of Madagascar’s substantial natural
resources in a manner that supports the wider development of the country. It is keen to attract more
international investment to the sector.
Through the EBDM’s 'one stop shop', companies can be set up in approximately five days. There is no
capital requirement for setting up a LLP, although a public company is required to commit 10,000
Ariary (about £2.50). 100% foreign ownership of a company is possible in all sectors apart from the
telecoms sector, where only 66% foreign-ownership is permitted. Income tax, corporate tax, and VAT
are all currently set at 20%.
Madagascar has a 'reasonable' and 'common-sense' policy towards the creation of economic
freezones. They can be set up for any sector in co-ordination with the EBDM, as long as 95% of the
product or service is exported. Services are exempt from corporation tax for two years. If you are
exporting a product which receives processing in country, a five year exemption is available.
The EBDM’s work on Madagascar’s PPP law is almost complete, and it is expected to be passed early
next year. Some PPP projects are already underway, but have been formulated in an ad hoc manner.
For example, the current customs process in the country is managed under a PPP-style arrangement.
Once the law is passed, it is hoped that a more standardised approach to PPP opportunities will be
formulated and a better understanding of PPP models will be engrained across government.
The EBDM will soon be launching a new list of prioritised 'investment ready' projects. The Malagasy
Government are, reportedly, 'open to considering mixed financing opportunities'. At the time of
writing, the list was planned to be launched in early October 2014 to be posted on the EBDM’s website
(http://www.edbm.gov.mg/) shortly thereafter.
Mr Andriamihaja provided the group with a helpful briefing on Madagascar’s current international
business relations. The Government 'are not discriminatory' with their international relations and,
whilst naturally links with France are strong for linguistic, cultural, and historical reasons, 'we are
not just going to stick with traditional relationships'. Thanks to major investments in natural
resources, after Canada, the UK is the largest provider of FDI in Madagascar, with France only the
fifth largest, according to EBDM figures. The Malagasy Government are taking a vigilant approach to
Chinese interests in the country; they are well aware of the substantial wealth Chinese organisations
can bring into a country, but they have been paying close attention to the challenges faced by other
regional governments in relations with China.
The EBDM is confident that over two to five years, Madagascar will be able to sustain growth as it
continues to address the economic and political challenges of reform. 'We are conscious of the
challenge', stated Mr Andriamihaja. The organisation is very public-facing and is open to supporting
any UK consultancies in finding appropriate local partners or setting up operations.
Economic Development Board of Madagascar Immeuble EDBM
Avenue Gal Gabriel Ramanantsoa Antaninarenina
Antananarivo
Madagascar
15
Ministère de l’Eau (Ministry of Water), Raymond Randrema, Secretary General
Water supply and sanitation are amongst some of the most serious issues facing Madagascar. The
country has an extremely high rate of diarrheal disease in young children in particular. Less than a
quarter of households in the capital have access to their own water supply.
Mr Randrema was also joined by senior colleagues representing the Ministry’s partnerships team,
sanitation and water resources. The Secretary General set out the three priorities of his Ministry’s
mission as: the delivery of safe drinking water, sanitation systems, and support of good hygiene.
Madagascar is a country quite rich in water resources, with the majority of water being provided
through gravitation, boreholes, and wells. The east of the country predominantly uses gravitational
supply; the drier west mostly uses boreholes; and the south, deep well systems. In the highlands, all
three sources are used.
The Ministry is facing a number of challenges, particularly in the rehabilitation and development of
the country’s water distribution network. The Ministry’s budget, as with all other government agencies
in Madagascar, is extremely limited. Government funds only cover around 20% of its budget, with
international agencies providing 80% (a total of approximately US $200 million).
Unsurprisingly, the five years of political turmoil and donor withdrawal made it very difficult for the
Ministry to implement many of its plans. It is extremely open to any partnerships or collaborations
that can help it achieve its goals within its limited means. The Ministry is open to the use of
consultancy to help support its planning and project needs, whether it is sourced locally or
internationally. The Ministry is already working with (DFID funded) British NGO WSUP to support low
income consumers, the management of sanitation in the capital, and solid waste management.
The Ministry has formulated a '2025 strategy document', which covers key developments the Ministry
would like to make, but will 'require substantial capacity building to implement'. Each of the 22
Regions of Madagascar has a corresponding department in the Ministry, which formulates the
priorities for each Region’s strategy. Of the 22 Regions, only five Regions have implemented any
projects, two have projects underway and the remaining 15 Regions have not yet formulated any
priority or planning documents for their Region. The Secretary General remarked that there is only
very limited national capacity to undertake small projects in the sector. He stressed the importance
of the Regional teams completing priority plans in order for international agencies and donors to be
able to ascertain the assistance they could provide. A meeting is due to take place to develop the
Ministry’s annual work plan for 2015.
The Secretary General was clear that the amount of water in the country 'is not an issue at all', and
that even the driest parts of the nation are reasonably rich in water; the management and distribution
of water resources is the key issue. There is currently a 25% rate of revenue loss from the system
managed by the state utility JIRAMA.
At the close of the meeting, the Secretary General highlighted projects in particular where he felt he
needed international support:
• The management of sewerage in urban Antananarivo
Sewers are mostly open, and any captured solid waste is simply driven out of the city,
disposed of further downstream without processing.
• Waste-to Energy biogas plant
The Secretary General estimated that Antananarivo produces approximately 700 tonnes of
waste that could be processed every day. Bids to support this project on a PPP basis had
been put on hold following the political crisis.
16
• Evacuation of rain water and flood plain management in Antananarivo
A study has already been made, and it is estimated that around US $200 million of works
would be necessary, although no funding has yet been identified. Three rivers converge in
the city, and there are still wetland areas used for rice cultivation. Consequently, the rainy
season causes substantial disruption to urban areas.
According to the Secretary General, bringing in international support for major projects using a PPP
model presents difficulties as all 'the Ministries are doing PPP in their own way' and hoped that the
PPP law might bring some greater co-ordination.
Ministère de l’Eau
Rue Tsiombikibo
Ambohijatovo Ambony
BP 322
Antananarivo 101
Madagascar
17
Chamber of Mines and APPAM (Association Professionelle du Secteur Pétrolier Amont de
Madagascar/Professional Association for the Upstream Petroleum Industry Madagascar)
Willy Ranjatoelina, Executive Secretary, Chamber of Mines
Willy Rasamoelina, Communications and External Affairs Manager, Rio Tinto
Marcelle Dane, President, APPAM
This meeting gave the delegation an important overview of the activities of two of the key private
sector business organisations operating in Madagascar.
The Chamber of Mines 'maintains good relations with the Government of Madagascar and the Ministry
of Strategic Resources'. It does undertake a reasonable amount of lobbying activities, focussing
particularly on the challenges companies face in the issuing of mining permits and the level of
taxation levied on mining companies. The Chamber consists of 23 member companies processing
applications from a further five prospective members. The group is 'becoming more and more
international' and includes all the major operators in country. Particular attention was given to the
training and infrastructure challenges faced by the Mining sector.
The lack of a good standard of infrastructure in Madagascar is a particular challenge for mining
companies operating in the country. Even with the extremely low energy and water charges, recovery
costs are 'about 35% higher than in South Africa or Botswana', 'generally the government has no
capacity to develop infrastructure'.
QMM (QIT Madagascar Minerals), the 80% Rio Tinto owned operator extracting ilmenite near Port
Dauphin, has been substantially involved in developing transport infrastructure in co-operation with
the Malagasy Government. The company extracts around 750,000 tonnes per annum and hopes to
expand to a level of 1.5 billion tonnes (although development is dependent on increases in ilmenite
prices). It invested US $200 million into the Ehoala Port in the South-East of the country as part of a
PPP with the government. Whilst the port is the key export point for QMM’s ilmenite, it can also
receive cruise ships, container, and refrigeration vessels and will be handed over to the state once
QMM’s project is complete. The port 'is a very positive story' and serves to demonstrate that the
Malagasy Government have recognised the vital need to improve access to the southern part of the
country. It is very open to looking at a variety of financing options to deliver necessary developments.
The government have also designated the area a special economic zone. In addition, QMM has
substantially contributed to road infrastructure in the area around its mine and has been working to
provide 50% of its work force with housing.
The provision of high quality training for local staff in Madagascar is 'an absolute necessity' for mining
companies; local capacity is extremely low. Local procurement of goods and services for the mining
sector is also limited. The Chamber of Mines has been working with the Australian Government, and
the German Gesellschaft für Internationale Zusammenarbeit (GIZ) to ensure that local professionals
can access the opportunities generated by the extractives sectors, and universities and training
institutions are teaching programmes that meet the needs of the sector in Madagascar.
APPAM (Association Professionnelle due Secteur Pétrolier Amont de Madagascar) are the private
sector trade body representing the upstream oil sector in Madagascar. Currently, there are 14
member companies presently operating in Madagascar, ten of which are international organisations
(such as Total, Exxon Mobil and Sterling Energy). The vast majority of companies in Madagascar are
still in the exploratory phase, though Madagascar Oil is starting the development processes for heavy
oil at Tsimiroro. All available onshore blocks in Madagascar have been attributed, although a new
round of bids for offshore blocks is due imminently. It should be noted that offshore blocks in
Madagascar can usually only be accessed between December and May.
18
APPAM are primarily lobbying on tax and customs issues. They are seeking a VAT exemption for
companies receiving third-party support (presently at 20%) and companies involved in exploration.
They are also hoping to remove the peculiar customs situation, whereby all materials (even
consumables) used by the sector that enter the country are only able to enter on 'temporary
admission' for two years. Consequently, companies are being required to renew customs licenses for
consumable materials, such as explosives, which no longer exist, according to Ms Dane. At the time
of writing, a new Petroleum law, covering both downstream and upstream sectors, was expected to
be voted on by the end of the parliamentary session.
Despite numerous challenges in the extractive sectors, both organisations encouraged greater British
interest in the Madagascar market, although they observed that with every passing month more
international companies are visiting Madagascar and that soon 'you will have to fight to get involved in
this market'.
An international extractives conference (run by CWC Group) is planned to take place in May 2015.
Both organisations are looking for partners who could support them in the delivery of this event.
Chambre des Mines
QMM Rio Tinto Villa 3H
Lot IIJ 169
Ivandry
Antananarivo 101
Madagascar
APPAM
c/o Immeuble Tana Water Front
Escalier C - Ambodivona
Antananarivo 101
Madagascar
19
OMNIS (Office des Mines Nationales et des Industries Stratégiques/Office of Mines and Strategic
Industries)
Bonaventure Rasoanaivo, Director General
Olivier Belalahy, Assistant Director
Hery Zaka Razafindrakoto, Deputy General Manager - Technical
Lalanirina Ranoroarisoa, Director - Hydrocarbon Division
OMNIS is the state organisation responsible for both the promotion and regulation of the extractives
sector. In part, it also functions as a state natural resources company, maintaining 20% shares in
many operations. It manages the exploration of new potential sites for exploitation. OMNIS will be
launching new bids for offshore exploration blocks, due early next year.
OMNIS is working with other relevant government agencies and ministries to prepare the new
Petroleum law. Under the proposals for the new law, it is likely that OMNIS would become much more
of a regulatory organisation with a new state extractives company being formed. The specifics of the
law (at the time of writing, draft is due towards the end of November 2014) are still being negotiated
by Malagasy Government parties and extractives companies. In particular, OMNIS was pushing for
exploration to become VAT free. The proposed law also seeks to cover both the upstream and
downstream sectors in Madagascar. This appeared to be a contentious issue for OMNIS, particularly
as it could force smaller exploration companies to become engaged with production.
Mr Rasoanaivo underscored the good working relationships between the extractive companies and
OMNIS. Throughout the drafting of the new law, it has sought to 'take into account the interests of the
companies' operating in Madagascar and represent its views to other government organisations.
Mr Rasoanaivo emphasised the major skills shortage his organisation is facing. At present, they are
very 'trusting' with the companies operating in the country. Each individual organisation is able to
follow its own best practice plans, with OMNIS only having limited ability to police their activities.
The organisation is keen to see a greater 'transfer of competencies' from companies to OMNIS and
an increased local training provision in contracts. The major challenge for OMNIS now is ensuring
that as the extractive industries grow in Madagascar; its organisational competencies can serve it
appropriately. Madagascar Oil is about to begin the development phase of its operations, but OMNIS
does not have the capability to approve or reject their development plans.
Support from UK companies, particularly in the area of training and regulatory development, would
be welcomed by OMNIS. Mr Rasoanaivo remarked that he would be happy to receive even unsolicited
proposals from UK organisations, who felt they might be able to assist him.
Office des Mines Nationales et des Industries Stratégiques
21 Rue Razanakombana Ambohijatovo
Antanananarivo 101
Madagascar
20
Ministère Auprès de la Présidence Chargé des Ressources Stratégiques/Ministry of Strategic Resources
HE Joëli Valérien Lalaharisaina, Minister of Strategic Resources
The Minister has oversight in all aspects of the extractive sectors in Madagascar. He gave the
delegation a clear presentation of the substantial opportunities Madagascar presents to the extractive
sectors and discussed his vision for the mining and oil sectors in the country. The country currently
has three key mining operations underway (mentioned in further detail elsewhere in this report).
Ilmenite and zircon are being mined by QMM/Rio Tinto, nickel and cobalt by Ambatovy, and chromite
is being exploited by the state-owned Societe Kraomita Malagasy. Feasibility studies are underway for
coal, iron, bauxite and rare earth. 16 oil companies have exploration licenses in Madagascar, with
Madagascar Oil being the most advanced in their work.
The crisis years 'put much on hold in the country'. The Minister hoped that, by next year, 70% of the
licensed companies with oil exploration licenses will have resumed drilling. He also stressed his
desire for Madagascar to have its own refinery as part of his ten year plan, located on the western
coast, so as to attract products from Mozambique. The new petroleum law will allow Madagascar to
undertake some institutional reform, create a new state company, and impose a newer, clearer,
regulatory arrangement. The Minister will also be encouraging the mining sector to provide more
'added value' to the industry. He remarked that, in the future, he hoped all mining companies would
be obliged to operate some form of additional processing in country to support local job creation.
Poor energy supply and lacking infrastructure remain the biggest challenges in further developing the
extractive sectors in the country. The Minister was conscious that the Malagasy Government needed
to look at all possible financing solutions, including PPPs, to help the country address its power
needs. 'For the benefit of the country, nobody would be against a new power station', no matter how
that project was developed. JIRAMA simply cannot provide enough power to support industry and
the Malagasy people. The Minister is, at present, encouraging a 'collaborative approach' across
government and ministries. He informed the delegation that he would welcome any commercial or
technical proposal that could support new power generation.
When questioned on whether Madagascar preferred to work with other Francophone countries or its
more traditional partners, the Minister remarked that 'Madagascar is open to any partner', from UK
companies to Chinese, Australian, Indian, and French.
Ministère Auprès de la Présidence Chargé des Ressources Stratégiques
Rue Farafaty Ampandrianomby
Antananarivo 101
Madagascar
21
Ministère de l’Energie (Ministry of Energy) and affiliated agencies
Olga Rasamimanana, Secretary General
Ibrahim Abdallah, Director General of Energy
Hary Razanarisoa, Technical Counsellor
Désiré Rasidy, Director General, JIRAMA
Andry Andrlantsilavo, Director of Planning, Office of Electricity Regulation
Ketakandriana Rabemananjara, Counsel, Office of Electricity Regulation
'Electricity is the base for economic development', stated the Secretary General at the start of the
delegation’s meeting. Few statements could be more relevant to the development needs of
Madagascar. Madagascar is a vast country (over 600,000 sq/km), with only 15% of the total population
having access to electricity. In urban areas, around 52% of the population can access electricity; in
rural areas, this drops dramatically to 4%. The Ministry is currently putting together its plan leading
up to the year 2030 (due to be launched early 2015). It hopes to provide 40% renewable energy by that
date. The Ministry’s new electricity policy is due to be released towards the end of the year (supported
by EU funds). Over recent decades, many government initiatives or developments have been delayed
or cancelled over periods of social and political turmoil. The last notable investment in the nation’s
power infrastructure took place in the 1980s, so 'there is a lot to catch up on'.
At present, Madagascar has a generation capacity of 450MW. According to the Ministry, the country
has the potential to generate approximately 7,800MW using hydropower. In 1978, the energy sector
was formally liberalised, and the new EU supported energy policy will be 'based on the idea that
foreign direct investment in the sector would be welcome and helpful' to help the country harness its
latent power resources. PPP finance approaches will be encouraged in the production and distribution
of energy. In order for investors' to feel comfortable' with involving themselves with the Madagascar
market, the Malagasy Government are conscious that ailing state utility provider, JIRAMA, needs
substantial assistance and support. JIRAMA faces challenges in maintenance and operation of its
facilities and across its general management structure. The World Bank is lining up a loan of US $80
million for early 2015 to help support infrastructure development, improvements in management and
transparency, and the development of a sustainable investment strategy.
Improvements in contracting procedures are also being supported by the AfDB.
The new energy policy and plan for 2030 will be followed by an implementation and financing strategy
before a 'model for partnership' document is developed. This will ensure that the Ministry and its
related bodies have formalised processes for when it works with third parties. Currently, all tender
procedures are managed via the Office for Electricity Regulation (ORE); however, under the new policy,
the planned tender process for future engagement with the private sector is not yet clarified. The
delegation felt that it is very likely the Ministry and related agencies will need substantial international
support in developing this. The Secretary General commented that she would welcome any direct
approaches from UK companies to offer support to the Ministry as it begins its reform process.
The Director General of JIRAMA advised the delegation to remain conscious that much of the
business culture of Madagascar is rooted in Francophone cultural, legal, and commercial traditions.
He remarked that he felt British companies often focussed on more 'practical solutions' than the
'more theoretical' French-speaking world. When the issue of Power Purchase Agreements (PPA, a
long-term agreement between the owner of a private generating facility and the utility) was raised
by the delegation, the group was advised that JIRAMA and the Malagasy Government, more generally,
did not have substantial experience of regularly using these types of agreements, and that they are
currently trying to adapt their policies to fit the more 'Anglophone' way of doing business. A particular
theoretical challenge around the possibility of the widespread implementation of PPAs seems to be
that, whilst Ministers are able to sign off major infrastructure projects, at this time, they are not
permitted to sign anything that might be deemed to include commercial transactions.
22
Presently, the Ministry does not have a budget to work directly with international consultancies.
Any assistance it does receive will come via projects supported by the development banks or
multilateral organisations. There was evident enthusiasm for the expertise in supporting
infrastructure, project finance, and effective management of procedures that international
consultancy could provide. The difficulty for many companies will be accessing funds that could
provide for their clearly necessary services.
Ministère de l’Energie
Rue Farafaty Ampandrianomby
Antananarivo 101
Madagascar
23
United Nations Development Programme - Madagascar
Fatma Samoura, United Nations Resident Coordinator and UNDP Resident Representative
Simplice Zouhon Bi, Economics Advisor and Head of Strategy and Policy Unit
Fatma Samoura is the UN resident coordinator and UNDP resident representative and, therefore,
the most senior UN representative in Madagascar. She provided the group with a detailed overview of
the UN’s role in Madagascar and also gave her perspective on the current socio-economic situation
in the country.
Ms Samoura is responsible for the safety and security of around 2,000 UN staff and dependents and
coordinates the work of the 17 different UN agencies operating in the country. The UN has maintained
a presence in Madagascar for more than 20 years. It does not serve as a donor or a funding body, but
rather as an adviser and a technical partner and mobilises its resources through core funding and
voluntary contributions to help build capacity and contribute to the development, human rights, and
humanitarian agenda in Madagascar. The UN resident coordinator co-chairs, with the Prime Minister,
the Strategic Dialogue Group, which is composed of all heads of Mission. It represents the whole
donor community and cooperation agencies with the view to support 'a convergent vision of
development, human rights, security and humanitarian challenges'. It is focussed on supporting
democratic governance, rule of law, national reconciliation, social cohesion, reform of the judicial
system, infrastructure development, basic social services, environment protection, water hygiene and
sanitation, human rights, gender and security.
Madagascar has 'had a long story of political instability'; over 52 years, there have been eight
constitutional referenda. The country is rich in natural resources 'but never well governed'; an
equitable distribution of national resources for the whole society has never been achieved.
Madagascar opened up in 2002 to a form of 'soft capitalism', but much of the social and political
leadership of the country has been used to serve the interests of the political and business elite.
The army interference in political affairs and the collusion between the politics and the business
world is another cause of concern.
71.5% of the population live below the poverty line with less than US $1.25 a day; over 90% live on
under US $2 a day. 30% of children receive no formal education. The country faces not only vast
economic and political challenges, but also environmental; 2 million hectares of forest were
destroyed between 1990 and 2010. Over that same period, the population doubled from 11 million
to approximately 22 million. 70% of all infrastructure budgets are funded by development aid.
During the crisis years from 2009 to 2013, more than 60% of this aid income was suspended as a
result of the unconstitutional change of regime.
Before the crisis, the country was receiving between US $700-800 million in aid per year, and this
level went down to US $350-400 million during the period of 2009-2013. With the country’s return to
constitutional order through peaceful and democratic elections, increased commitments should grow
this to approximately US $1 billion. 30-40% of the Malagasy Government’s budgets are derived from
international aid. 95% of the national budget is spent in urban areas, even though 70% of the
population live in rural areas. Madagascar is a country facing deeply complex and historically
engrained challenges.
For the UN and many other international organisations, national reconciliation is a 'priority'. If
effectively managed, the return of Ravalomanana to the country could help bring this process forward
and 'break the cycle' of political turmoil that has restricted the development of the country.
Madagascar is 'blessed by nature... investors will be knocking down the door if stability is achieved'.
Properly effective CSR programmes will be a vital part of ensuring that any investment in the
country is as beneficial as possible for the local population. Ms Samoura noted that she did not feel
that CSR was 'deeply rooted' enough in Madagascar, and international companies needed to improve
their efforts.
24
International NGOs are very active across Madagascar; the International Federation of Red Cross
and Red Crescent Societies (IFRC), the Worldwide Fund for Nature (WFF), CARE and CARITAS are all
present, amongst many others. According to Ms Samoura, present legislation means that NGOs
find it very easy to set up in country and are often able to implement infrastructure or development
projects more easily than other bodies.
Ms Samoura identified the Judiciary and JIRAMA as being particularly problematic public institutions.
The Judiciary in Madagascar is, from Ms Samoura’s perspective, the institution with the most
corruption issues. JIRAMA 'has to be privatised or restructured'. The state utility loses around 30%
of the power it produces due to poor infrastructure and illegal connections. The new anti-corruption
body in Madagascar, BIANCO, has not yet been able to make a substantial impact on the Malagasy
public space and very few arrests have been made.
Security on the island, particularly in rural areas, remains problematic. Banditry is prevalent, and the
Malagasy Navy is extremely underequipped to deal with the illegal exports of ebony and rosewood
from the country.
The UN has been enthusiastically encouraging the Malagasy Government to complete the NDP for
some time, even before the 2014 elections, and has been supporting an interim development plan to
help the government solidify its priorities as quickly as possible.
Ms Samoura emphasised the importance of approaching Madagascar as a fundamentally different
market from its neighbours on the African continent; the resilience of the population should not be
underestimated. For example, in May 2013, there were strikes all over the country. In any other
regional market, the UN might have considered it likely that the State would collapse; however,
very little happened and the government carried on. In Madagascar, our 'normal references and
benchmarks do not apply to the country’ and need to be revisited.
Ms Samoura stressed that Madagascar should be a desirable investment destination, ‘manpower is
very affordable and many fiscal facilities are granted to investors working in free trade zones.’
UN Common House
Galaxy Plaza - Andraharo
Majunga Road
Box 1348
Antananarivo 101
Madagascar
25
African Development Bank
Kaningbi Nyaki-Zangbula, Principal Chargé des Opérations
Andrianarison Rakotobe, Transport Consultant
'The need [for international consultancy] is there, and the need is huge', declared Mr Nyaki-Zangbula.
From the Bank’s perspective, Madagascar’s development is hindered by two main factors:
• The capacity for planning within Malagasy bureaucracy
• The effective mobilisation of resources
All of the Bank’s work in the country seeks to address these two factors. Away from Antananarivo,
the country is sparsely populated and very limitedly governed. 'There is no authority and no
administration'. Over the crisis period, the bank maintained its presence in country but refrained
from providing support for any major new projects. Since the new government came into power,
the Bank has noticed 'huge interest' in the market from international companies. It has an ongoing
portfolio of approximately UA 220 million (primarily in the transport and support for the governance
of public finances), with an anticipated 30% increase in activity.
The Bank focuses on projects in transport, energy, food security, agriculture, governance and health.
The most basic need that must be addressed by Madagascar is food security, and this issue remains
the Bank’s 'main goal'. Effective distribution of food, via a functioning transport sector, is, naturally,
a closely related priority. Roads projects will be an ongoing priority for the Bank. The Road
Infrastructure Development Project (PAIR) managed by the Bank, will improve access to the
southwest of the country. Over four years, the UA 63.49 million project will develop and pave the
Toliara-Analamisampy road, support the reconstruction of Pomay bridge on RN 35, rehabilitate rural
roads, and provide studies on improving road maintenance measures.
The Bank is enthusiastic to mobilise the private sector in the development of Madagascar’s road
network. The delegation was informed that there 'is definite interest' in the provision of toll roads.
The Malagasy Government has asked the Bank to provide some guidance of PPP structures in order
to help them garner international interest. 'People know the value of a good road, and they are ready
to pay for it', stated Mr Nyaki-Zangbula. PPP is a new concept to the country, but the government
'know it works in other parts of the world… and they are willing to receive a tutorial'.
Ordinarily, the Bank would work with Malagasy Government to support 'whatever the government'
have identified as priority projects, using the NDP as a basis. In the absence of an NDP, the Malagasy
Government have accepted an interim country strategy from the Bank covering 2014, 2015 and 2016.
The updated interim strategy should be available on the AfDB website from the end of October 2014.
Once the NDP is issued, it is fully expected to fit with the objectives of the interim strategy.
It should be noted that the Bank had proposed to the Malagasy Government that they could help
provide financing to allow international experts to assist with the NDP. But at the time of writing, no
request for support had been issued. Mr Nyaki-Zangbula stated that, whilst from the outside it may
look as if 'nothing is happening' on the NDP, there are huge parts of the Malagasy bureaucracy
working hard towards the NDP 'without support'. As a result of this, the Bank has not sought to push
the Government for a quick publication of the NDP. Whilst the international community may desire
a quick resolution, the Bank is conscious of the importance for the Antananarivo Government to
adequately build support for the plan from the regions.
International engagement with Madagascar is growing, and, given the environment the Bank endured
during the crisis years, Mr Nyaki-Zangbula was confident that there is reason to think that whilst the
situation in the country is not necessarily 'bright', it is 'certainly not dark'. If the country can improve
security in the regions, address corruption (particularly in the judiciary), and improve the role of the
private sector there are reasons to be optimistic.
26
The delegation was encouraged to make sure that if they were interested in working in Madagascar;
a local presence in the market is vital, rather than relying on occasional visits. 'The Chinese are much
better at that'.
African Development Bank
Bureau Nationale de Madagascar
Antananarivo 101
Madagascar
27
Delegation of the European Union, Jacques Legros, Chargé for Infrastructure, Transport and Energy
The EU has been supporting a number of projects across the energy and infrastructure sector in
Madagascar. Previously, the EU has given less attention to energy, but is now supporting two
hydropower projects in the east of the country with approximately €8 million of funds. Over the last
five years, the delegation has provided €240 million to support road developments. Under the
leadership of GIZ, the EU delegation is setting up an EU Energy Initiative Partnership Dialogue Facility
to help Madagascar become an attractive destination for investment in renewable energy.
The EU’s project programming for the next five to six years in Madagascar is dependent upon the
content of the NDP (which at the time of writing has not yet been issued). The EU’s support is likely
to be across three areas:
• Good governance and private sector development
• Rural development and food security
• Infrastructure (roads, power, water)
It is not yet clear which of these areas will be prioritised through the period of the 11th European
Development Fund (2014-2020). The EU’s grant for the period is likely to total between €455 and €550
million. The National Indicative Plan (NIP) is due to be finalised early next year.
Mr Legros identified JIRAMA as 'a big problem' for the country, due to its poor management structure.
He expected that the World Bank’s planned loan to the organisation next year would help develop
JIRAMA into a more effective, business-like organisation, even if full privatisation was unlikely.
According to Mr Legros, the Chinese are not well integrated into the international and donor
community in Madagascar. Consequently, many international missions only have a limited
understanding of the Chinese presence in country and their plans for further engagement.
The EU is keen to put forward its policy of 'blended' infrastructure investment in Madagascar over
the coming years; it hopes the Malagasy Government will consider mixed loans, grants, and finance
options from the private sector and embrace 'innovative financing'.
Mr Legros was optimistic that over the next three to four months, once the NDP has been issued, the
direction for the Malagasy Government will be much clearer.
Tour Zital 9eme étage
Ankorondrano
Antananarivo 101
Madagascar
28
ADEMA (Aéroports de Madagascar/Airports of Madagascar)
Herison Andriamihafy, Director General - General Aviation Division
Jean Germain Andrianiaina, Technical Director
Madagascar has 57 airports, or aerodromes; 12 of which are under the supervision of ADEMA.
ADEMA are 'now entering a period of development' and aiming to upgrade the quality of theirs
services and improves their security processes to international norms.
ADEMA’s airports see 1.3 million visitors pass through them every year, with 800,000 of them
passing through Antananarivo’s Ivato Airport. Fascene Airport at Nosy Be is the country’s second key
international hub. ADEMA are keen to develop and implement an existing master plan for these two
key centres, which will allow them to effectively judge the necessary development the sector will need
to undertake in order to meet the demands of the coming decades.
ADEMA are conscious that 'an external view' of their sector is necessary and engagement from
international consultants is 'absolutely necessary'. However, the organisation has 'very limited funds'.
The Director General noted that without ability fund consultants to develop their plans to the
required international standards, attracting further funding from donors or multilateral agencies is
very difficult.
The delegation suggested that a matrix of financing solutions may be a means to support the funding
of international experts. Indeed, the appropriate taxation of mineral companies, who would no doubt
benefit from the improvement of the aviation sector, may well be part of that solution. The delegation
also informed ADEMA that some specialist support for improving their existing plans and
documentation from individual UK companies might be possible.
Zone Aviation Général
Ivato
Antananarivo
Madagascar
29
IV
Bibliography
Bertelsmann Stiftung, BTI 2012 Madagascar Country Report,
Bertelsmann Stiftung (2012)
Dabiere, J.M. and Bi, S.Z., Madagascar 2014 (African Economic Outlook - pdf),
www.africaneconomicoutlook.org (2014)
Economist Intelligence Unit, Madagascar Country Report (September 2014),
Economist Intelligence Unit Limited (2014)
International Monetary Fund, IMF Country Report: Republic of Madagascar
(No. 14/181), International Monetary Fund (2014)
World Bank, Opportunities and Challenges for Inclusive and Resilient Growth:
Madagascar Policy Notes Collection 2014,
World Bank (2014)
30
V
Useful Links
http://www.madagascar.gov.mg/
Madagascar Government Portal
http://www.meieat.gov.mg
State Ministry of Infrastructure, Equipment, & Regional Planning
http://www.mefb.gov.mg
Ministry of Finances & Budget
http://www.economie.gov.mg
Ministry of Economics & Planning
http://www.industrie.gov.mg
Ministry of Industry, Private Sector Development
http://www.ecologie.gov.mg
Ministry of Environment, Ecology, & Forestry
http://www.commerce.gov.mg
Ministry of Commerce
http://www.mineau.gov.mg
Ministry of Water
http://www.transport.gov.mg
Ministry of Transportation & Meteorology
http://www.tourisme.gov.mg
Ministry of Tourism
http://www.worldbank.org/en/country/madagascar
World Bank Country Page: Madagascar
http://www.afdb.org/en/countries/central-africa/madagascar/madagascar-economic-outlook/
African Development Bank Group: Madagascar Economic Outlook
https://www.gov.uk/government/world/madagascar
UK Government Travel Page: Madagascar
http://www.eeas.europa.eu/delegations/madagascar/index_fr.htm
Delegation of the European Union in Madagascar
http://www.africaintelligence.com
Publications and analysis on African markets
31
VII
Delegation
Mott Macdonald House
8-10 Sydenham Road
Croydon
CR0 2EE
Tel: +44 (0) 20 8774 2000
http://www.mottmac.com/
WYG
Arndale Court
Headingley
Leeds
LS6 2UJ
Tel: +44 (0)113 278 7111
Email: [email protected]
Hill International (UK), Ltd.
11 Pilgrim St
London
EC4V 6RN
Tel: +44 (0)20 7618 1200
http://www.hillintl.com/
32
VIII
Key contacts
FCO and UKTI Contacts
Soarinantenaina Ratsimbazafy
Prosperity Officer
British Embassy Madagascar
9th Floor
Tour Zital Ravoninahitriniarivo
10 Antananarivo
Mandagascar
Tel: +261 20 22 330 53
Mob: +261 34 49 330 58
Email: [email protected]
Grant Mandigora
Regional Trade Co-ordinator-Southern Africa
UK Trade & Investment
Dunkeld Corner
275 Jan Smuts Ave
Dunkeld West
Johannesburg
South Africa
Tel: +27 (0) 11 537 7232
Email: [email protected]
Key Trade Associations
Business Council for Africa (West & Southern)
5 Lavington Street
London
SE1 0NZ
Tel: + 44 (0)20 3730 5035
Email: [email protected]
http://www.bcafrica.co.uk/
Madagascar-British Chamber of Commerce
c/o Fuelstock Madagascar
Rue Henri Palu
Mahajanga
Madagascar
Tel: +261 32 05 26 007
Report composed by British Expertise
33
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